Social and welfare issues

OECD Roundtable on Sustainable Growth

OECD Roundtable on Sustainable Growth

Remarks by Angel Gurría, OECD Secretary-General

10 February 2011, Helsinki, Finland

Dear Prime Minister, ladies and gentlemen,

It is my great pleasure to bring forward our discussions from the early part of the morning and to focus on another key feature of global prosperity, the question of intergenerational responsibility, fairness and solidarity.

We are delighted that this issue features so prominently on the Finnish policy agenda, as this is one of our priority areas of work. In fact, one of the sessions at the upcoming OECD Social Policy Ministerial in Paris on the 2-3 May 2011 will focus on the challenges to intergenerational solidarity and on policies which may help to foster and sustain fair exchanges between generations.

Population ageing – a result of fewer babies and longer lives – could prove a particular stress point for intergenerational fairness and solidarity. The share of people over 80 in OECD countries is projected to increase from 4% in 2010 to nearly 10% by 2050. The two-way exchange of time and money between generations works best in times of demographic balance. But the social, economic and demographic changes our societies are facing makes this balance harder to achieve. Labour-force participation of women has increased. And families are not only smaller, on average, but they are also more fragmented today as a result of divorce, remarriage and lone parenthood. These developments weaken the bonds between family members and reduce opportunities for both younger and older people to spend time taking care of children and the frail elderly. Finland stands out in all these issues, given its particularly adverse demographic path.

The fiscal pressure from ageing populations is large. Pension, health and long-term care spending is forecast to grow faster than national income in almost all OECD countries. Finding the additional resources to meet these demands on the public purse will be a huge challenge for governments everywhere. So far, in most countries the main focus has been on making pension systems financially sustainable and socially adequate. One of the key solutions lies in longer working lives. Again this is an issue that is prominent in Finland and we look forward to continuing the dialogue with you on pension and disability reforms.

But public transfers between generations – in the form of pension, health, long-term care and other services – are not the end of the story; there are also substantial private transfers. These involve both time – caring for children or the frail elderly, for example – and money.

Increasingly, policymakers are recognising the important role of grandparents in maintaining intergenerational solidarity. In addition to making cash transfers to their children, grandparents often make an important transfer of time by providing care to their grandchildren. And in some countries, for example Australia, grandparent childcare benefit have been introduced, or the right for grandparents to work part-time explored, as in France.

Also, think of the challenge which long-term care poses for solidarity. Most care for older people is informal, about two-thirds of informal carers are women, and between 70% and 90% of people providing care for older people are family members. The costs of long-term care are likely to rise in the future, and there are serious concerns as to whether families will be able to supply sufficient care in the future to meet the growing needs. We will shortly be releasing a major report on long-term care policies in OECD countries which offers a number of options to address this challenge.

The transfer of economic resources across generations is not all that counts. Fairness is also about ensuring that what contributes to people’s well-being today can be sustained in the future: in other words, that we preserve the well-being of our children.

The OECD is currently working on the measurement of well-being and will publish a report entitled “How’s Life?” in the context of the OECD 50th Anniversary. The report will provide for the first time comparable indicators on several important aspects of people’s well-being in OECD and emerging economies, such as jobs, health, education and housing but also the functioning of institutions, personal security and the quality of the local environment.

As policy makers, we need to ensure that the capacity of our societies to achieve good outcomes can last over time. This requires preserving a range of assets, natural or man-made, that are essential for tomorrow’s well-being. These assets include not only environmental capital, but also human, intangible and social capital. For example, in ageing societies like Finland, it is key to ensure that the investment made in education and training today is sufficient to offset the loss of human capital that may result from the retirement of large cohorts of older people.

Fairness also includes the dimension of green growth. Measures to stimulate economic activity can contribute to achieving both short- and long-term environmental objectives. For example, investments that will improve energy and resource efficiency can stimulate demand and employment in the short-term. These investments simultaneously serve to combat climate change and propel Finland faster towards green growth and a low-carbon economy, creating jobs for the future.

These considerations are especially important in Finland. You have made important progress in reducing the amount of energy and materials required to support economic activity. Undertaking further green tax reform, reviewing prices, taxes and subsidies in the main sectors of the economy, could build on Finland’s pioneering tax reform in the 1990s.

Innovation is a key aspect of green growth and Finland has a world-wide reputation for innovation. It is exactly in the energy- and resource-intensive industries that the world needs smart solutions. Finland has the potential to become a role model showing ways to capture major new markets globally, while also improving its own environmental performance by fostering innovation.

Climate change is one of the most serious of intergenerational transfer issues, and the comprehensive management of climate change will be the predominant theme of the Finnish Presidency of the Nordic Council of Ministers in 2011. The Finnish government has rightly emphasised that Nordic countries have the required expertise and will be at the forefront of efforts to curb climate change.

The OECD experts who are here with us today are looking forward to a lively discussion and exchange of views around all these important issues. Let me briefly introduce them:

Martine Durand, the Head of the Statistics Directorate, will present our ongoing work about Measuring Progress of Societies.

John Martin, the Director of the Directorate for Employment, Labour and Social Affairs, will frame the issue in the context of an ageing population.

But as said, intergeneration fairness also has to encompass the imperative of greening our economies. Anthony Cox, from the OECD Environment Directorate, will link fairness to green growth.

To conclude, I want to assure you that the OECD takes the topic of fairness and intergenerational solidarity very seriously as the presentations by my colleagues will illustrate. We believe it is an essential part of our responsibility today, and that it will be essential for the creation of a stronger, cleaner, fairer world economy tomorrow.